Trying for 100% back BRRRR is a bad strategy!

[Jorge Vazquez]

The goal of pulling out all of the money is a little unrealistic right away, puts a lot of pressure on you and your team. This is especially the case when you are trying to do volume and want to build a big portfolio fast. I usually try to get at least 80% to 90% of my money back within the first 12 months. And the reason I say this is because if I wait for the perfect scenarios to get 100%, chances are I'm gonna miss a whole bunch of good deals, upset my GC, property manager, and my acquisition team. And by the time I finally find the properties I need to build a significant portfolio, the properties will cost me more, therefore defeating the whole purpose. I'm just talking about people that want to gain real momentum, have the cash to keep out 10-20% long-term out, and are serious about building a big portfolio of great properties as fast as possible. Do not let 10% steal your thunder!!!! :) 

[Marcus Auerbach]

I completly agree with you @Jorge Vazquez - 100% cash out is a bit unrealistic. I have been BRRR-ing single family homes in Milwaukee for over 10 years and my all-in cost is usually 90% to 100% of ARV. I would say only 1 or 2 out of 10 come in at 80% or better.

We do things the right way, the goal is to not touch the property for at least a decade or two. Sometimes we also add lifestyle value, which certainly does not help to keep cost down. One of my current projects is a prime example. Did I have to replace the drive way and pour a concrete patio in the back? Of course not! 

But having a functional and private back yard patio and a finished basement adds value to the property and is the reason why we have next to no turnover. I figure that a typical turnover will cost me 3x rent or about $5,000 - it pays to retain good tenants long term.

The best way to reach 100% cash out is by not doing any major capex projects. Keep the old roof and the old windows. Don't replace the old siding and the driveway may be hard to look at, but replacing it will not add much ARV. I just listed 35k of work and kicking that can down the road will let you cash out better, but it will catch up with you eventually.

That's why we do things right away; even though it costs more, the result is a better asset, better tenants and better long term performance.